Omaha Bankruptcy Attorneys Shed Light on the Differences Between Chapter 7 and Chapter 11

Bankruptcy can be a daunting and complex process, but it can also provide individuals and businesses with the opportunity to regain financial stability. In Omaha, navigating the bankruptcy system can be made easier with the guidance of experienced bankruptcy attorneys. This article aims to shed light on two common types of bankruptcy—Chapter 7 and Chapter 11—and explain the key differences between them. Whether you are an individual or a business owner in Omaha facing financial challenges, understanding these distinctions will help you make informed decisions about your financial future.

Chapter 7 Bankruptcy:

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” is designed to offer individuals a fresh start by eliminating most of their debts. Omaha bankruptcy attorneys specializing in Chapter 7 proceedings can help you understand the intricacies of this process.

Eligibility:

  1. Chapter 7 bankruptcy is primarily available to individuals or couples who cannot repay their debts due to financial hardship. To qualify, you must pass the “means test,” which compares your income to the median income in Nebraska. If your income falls below the state median, you are likely eligible for Chapter 7.

Liquidation:

  1. In Chapter 7, a trustee is appointed to evaluate your assets and determine which ones are non-exempt. Non-exempt assets may be sold to repay creditors. However, many assets are protected under state and federal exemption laws, ensuring that you retain essential possessions such as your home, vehicle, and personal belongings.

Discharge of Debts:

  1. Chapter 7 bankruptcy allows for the discharge of most unsecured debts, including credit card bills, medical bills, and personal loans. However, certain debts like student loans, child support, and tax obligations are generally not dischargeable.

Chapter 11 Bankruptcy:

Chapter 11 bankruptcy, often referred to as “reorganization bankruptcy,” primarily focuses on providing businesses with an opportunity to restructure their debts while continuing operations. Nebraska bankruptcy attorneys well-versed in Chapter 11 can guide you through this intricate process.

Applicability:

  1. Chapter 11 bankruptcy is available to both businesses and individuals with significant debts. It is commonly utilized by corporations, partnerships, and limited liability companies (LLCs).

Debt Restructuring:

  1. Unlike Chapter 7, Chapter 11 allows businesses to propose a repayment plan to restructure their debts and make them more manageable. This plan is subject to court approval and typically extends over several years, providing businesses with the necessary time to regain financial stability.

Business Operations:

  1. Throughout the Chapter 11 process, businesses can continue their operations under the supervision of the bankruptcy court. This allows them to generate income and reorganize their affairs, aiming for a successful recovery.

Conclusion:

Understanding the differences between Chapter 7 and Chapter 11 bankruptcy is essential when facing financial difficulties in Omaha. Whether you are an individual seeking debt relief or a business owner trying to restructure your operations, consulting an experienced attorney is crucial. These legal professionals have the expertise to guide you through the complexities of bankruptcy and help you determine the most appropriate course of action for your specific situation. By leveraging their knowledge, you can make informed decisions that will set you on a path towards financial recovery and a brighter future.